Google Inc (NASDAQ:GOOG)’s video asset, YouTube, is showing signs of explosive growth in monetization. The video-sharing platform’s mega user base loves watching videos, according to their own discretion. YouTube has a rock-solid presence in mobile, which gives it an edge in competing for video advertising dollars on mobile. And more importantly, marketers are jumping on YouTube’s bandwagon to reach their target audience effectively, thanks to newer ad formats like TrueView, which allows the user to skip or watch the ads.
YouTube is supremely well-positioned
Google Inc (NASDAQ:GOOG)’s leading video site, YouTube has racked up more than 1 billion monthly users who watch more than 4 billion hours of video each month. And this leading video platform gets more than 70% of its user traffic from outside the U.S. as well, and 25% of its total views are on mobile. In the U.S., mobile views make up a whopping ~40% of its usage.
A leading YouTube executive disclosed that ad sales on mobile devices tripled in the last six months, and some analysts have estimated that mobile video ad sales alone contributed ~$350 million to YouTube in the last six months. This shouldn’t come as a surprise as mobile usage across the globe has picked up steam rapidly, and YouTube has a lead over other ad-supported services like Hulu.
According to eMarketer, U.S. mobile video-ad sales are expected to grow to $2.69 billion in 2017, which is roughly a 10-fold increase from 2012. And YouTube is in pole position to earn the lion’s share of that pie by stepping up competition with rivals.
Consumers and advertisers dig YouTube!
As a result, YouTube is increasingly enabling top brands to target consumers in the multi-screen world, as more consumers watch videos on tablets and other devices. The usage of YouTube by viewers has increased by more than 50 million hours a day from the previous year, largely driven by the younger generation.
And Google Inc (NASDAQ:GOOG)’s management is expecting that online advertising will exceed 50% of total advertising in the next five years or so, owing to the rapidly increasing number of Internet-connected devices and the rising number of video ads stemming from the phenomenon of TV Everywhere. Therefore, YouTube will be a major beneficiary of this secular shift for video ads to be portrayed on the Internet instead of TV Channels.
According to comScore, ~182 million U.S. consumers watched 38.8 billion online content videos in April-2013, and the number of video ad views online hit an all-time high of 13.2 billion.
| Top U.S. Online Video Content Properties April-13(Content Videos Only) | |||
|---|---|---|---|
| Property | Total Unique Viewers (000) | Videos (000)* | Minutes per Viewer |
| Total Internet : Total Audience | 181,934 | 38,751,621 | 1,201.9 |
| Google Sites | 154,553 | 13,022,807 | 401.0 |
| 62,730 | 740,844 | 25.2 | |
| VEVO | 52,906 | 613,278 | 39.2 |
| NDN | 45,294 | 497,673 | 81.0 |
| Yahoo! Sites | 45,111 | 368,957 | 72.0 |
| Viacom Digital | 43,661 | 436,319 | 46.4 |
| Microsoft Sites | 42,219 | 538,009 | 43.1 |
| Amazon Sites | 36,900 | 142,413 | 19.1 |
| AOL, Inc. | 36,115 | 625,801 | 60.3 |
| Turner Digital | 34,914 | 307,316 | 48.5 |
Source: comScore (5/13)
According to Internet World Stats, there are ~245 million Internet users in the U.S., and 74% of this audience is watching online videos. The outlet of choice is clearly YouTube as 63% of the U.S. Internet audience or 154 million users have watched videos on YouTube. A closer look at the table above shows that YouTube gets a lot more time per user compared to other sites with 33.4% of all online minutes, or 401 minutes per viewer. YouTube has been trying to figure out ways to increase the session length of users, because more minutes per viewer would translate into a lot of incremental advertising dollars.
Google Inc (NASDAQ:GOOG)’s rival in the Internet space, Facebook Inc (NASDAQ:FB) is a distant second in terms of viewers and in terms of the number of videos shared. Only a fraction of Facebook Inc (NASDAQ:FB)’s users in the U.S. use embedded videos to share on the largest social platform in the world. And Facebook Inc (NASDAQ:FB) is trying to get a piece of the video advertising market as well. The social media giant recently rolled out a video ad format to enable videos in the page posts by advertisers who like the video format.
YouTube on mobile and TV
In March 2013, the YouTube app was used by more than half of the smartphone users in the U.S. or 70 million people, which represents a Y/Y growth of ~42%, according to Nielsen. Higher penetration rates of smartphones and tablets in the U.S. and across the globe will lead to more users utilizing the mobile app of YouTube, which will lead to incremental mobile ad dollars for the company.
